Is Cofco overoptimistic on Brazilian sugar?

Certainly, for mills in Brazil’s Centre South to crush the 550m tonnes of cane in 2022-23 that the Chinese trader forecast on Monday looks a stretch,

It is that getting it processed may be a struggle, given the wetter weather that tends to beset the region late in the calendar year, putting the dampeners on cane harvesting. (And the rainy season may have kicked in early in 2022, of recent wetness is anything to go by.)

While the Centre South crushing season in theory has plenty of time to go, not finishing until the end of March, the cane crush is very much loaded towards the first half.

Cane crush read through

Indeed, mills on average crush 38m tonnes of their cane in the period from mid-October to the end, GrainPriceNews analysis of the past five seasons shows.

The read through to 2022-23, during which mills have crushed 458.7m tonnes of cane up to mid-October, data from industry group Unica show, suggests that mills will be lucky to get much past 495m tonnes by the close of the season.

Even matching the 2020-21 season – when mills processed 67 of cane over the last five and half month of the season, the best performance of the five-year period – would take the crush to only 525m tonnes this time.

That is only just above last season’s total.

Sugar production

As for sugar output, that could fall below the 32.1m tonnes produced last season, rather than rising to the 32.9m tonnes expected by Cofco, let alone the 34.8m tonnes forecast by Job Economia.

Centre South mills on average produce 3.3m tonnes of the sweetener from mid-October to the end of the season.

Adding that to the tally reported so far for 2022-23 gets to 31.4m tonnes by the close, which would be a three-year low. Even factoring in the recent high of 4.7m tonnes achieved in the latter months of 2017-18 would get this season’s output only to 32.9m tonnes.

Out of India?

Sure, it is entirely possible that we could end up with a bigger figure this time.

The relatively low volume of cane crushed so far is a reflection of a late start to harvesting, to allow it recover from frost and drought damage, rather than of a lack of crop per se.

But to get much beyond the recent range would require the co-operation of the elements, and drier-than-normal weather.

It is more likely that cane crushing and sugar output will be constrained, limiting exports too. (While leaving plety of carryover “bisada” cane for 2023-24.)

That in turn would increase the market’s reliance on alternative shipments from India which, given their price at just under 18 cents a pound for raw sugar, according to Czarnikow, would suggest support not far below current values – although for white sugar the downside looks more substantial.